*1 On October 17, 2022, Chief Judge Saylor granted CFE International LLC's (“CFE Int'l”) application for a subpoena pursuant to 28 U.S.C. § 1782 for documents and deposition discovery from Denham Capital Management LP (“Denham”) in aid of a criminal proceeding in Mexico. Docket No. 30. Denham has moved to quash the subpoena pursuant to Rule 45 of the Federal Rules of Civil Procedure. Docket No. 37.[1] For the following reasons, I recommend that Chief Judge Saylor deny the application.[2]

I. FACTUAL BACKGROUND

A. The Parties

CFE Int'l is the wholly owned subsidiary of Comisión Federal de Electricidad (“CFE”), Mexico's electrical utility. Declaration of Sam Anson (Docket No. 8) (“Anson Decl.”) at ¶¶ 11, 14. CFE Int'l was incorporated in 2015 and was created to manage CFE's United States natural gas pipeline transportation agreements and to procure reliable and affordable long-term natural gas supply in the United States for export to Mexico. Declaration of Fernando Aponte Martinez (Docket No. 7) (“Aponte Decl.”) at ¶¶ 9-10. After purchasing gas in the United States, CFE Int'l sells it to CFEnergia S.A. de C.V. (“CFEn”),[3] which in turn sells it to other subsidiaries of CFE—power generation companies called “GenCos” that convert the gas into electricity for sale to Mexican consumers. Id. at ¶ 10.

Guillermo Turrent Schnaas (“Turrent”) is a former executive of CFE and the former Chief Executive Officer of CFE Int'l. Anson Decl. at ¶ 12. Javier Gutierrez Becerril (“Gutierrez”) is a former executive of CFE and the former Chief Operating Officer of CFE Int'l. Id.

*2 WhiteWater Midstream LLC (“WWM”) is a limited liability company incorporated in Delaware by Matthew Calhoun and Christer Rundlof, among others, with its principal place of business in Austin, Texas. Id. at ¶ 15. WWM is a midstream service provider that operates in the gas delivery and sale business. Id. It commenced formal operations in June 2016. Id. Arlin Travis is the Senior Vice President of Marketing at WWM. Id. at ¶ 12. CFE Int'l maintains that Calhoun, Travis, Turrent, and Gutierrez have longstanding personal and professional relationships. Id. at ¶ 27.

Denham is a Delaware entity with headquarters in Boston, Massachusetts that operates a global private equity investment firm specializing in the energy sector. Id. at ¶ 16. Since the time of the firm's founding in 2004 through the present day, the many private equity funds advised by Denham have made or make investments globally in oil and gas, sustainable infrastructure, and metals and mining. Declaration of Anthony Fiore (Docket No. 37-2) (“Fiore Decl.”) at ¶ 4.

According to CFE Int'l, Denham was WWM's first major investor, committing to funding WWM before that company was awarded any contracts of significance. Anson Decl. at ¶ 33.

B. The Waha Connector Agreements

On or around December 9, 2016, CFE granted several long-term natural gas transportation contracts to WWM (the “Waha Connector Agreements”). Id. at ¶ 19. Under the Waha Connector Agreements, WWM was obligated to construct a connector pipeline for CFE—the Waha Connector—and to provide transportation services on this pipeline to one of CFE's pipeline header systems in Texas called the Waha Header. Id. The Waha Connector Agreements also provided WWM with the rights to market and optimize transportation capacity on the Waha Connector and the Waha Header. Id. In addition, in March 2017, CFE Int'l and WWM entered into the Waha Supply Agreement, under which CFE Int'l agreed to buy one million MMBtu/day of natural gas for a fifteen-year term. Id. at ¶ 43.

According to CFE Int'l, Turrent, Gutierrez, and WWM conceived of the Waha Connector Agreements and Waha Supply Agreement as a package deal from the start. Id. at ¶ 31. Before soliciting bids for the Waha Connector Agreements and the Waha Supply Agreement in July and August 2016, Turrent and Gutierrez first negotiated terms for both sets of agreements with WWM. Id. at ¶¶ 32, 35-37. The terms of those agreements are very similar in critical respects to the final contracts ultimately awarded to WWM. Id.

In May 2016, only two months after WWM was formed, Denham's CEO Stuart Porter met with Turrent and a group of representatives from WWM in San Diego, California, to discuss future CFE Int'l and WWM business. Id. at ¶¶ 32, 33. At that time, CFE Int'l had not yet launched a bid process for the Waha Connector Agreements or Waha Supply Agreement. Id. Following that meeting, Turrent emailed Porter on May 28, 2016, stating “[o]n the waha stuff, we will take care of it the [sic] whitewalter folks.” Id. Two days later, on May 30, 2016, Turrent signed a memorandum of understanding with WWM relating to what became the Waha Connector Agreements and the Waha Supply Agreement. Id. On July 1, 2016, Denham and another private equity firm made a combined investment of $200 million in WWM. Id. at ¶ 34.

CFE Int'l maintains that Turrent and Gutierrez did not solicit bids for the agreements until after they had negotiated their terms with WWM. See id. at ¶¶ 35-41. According to CFE Int'l, Turrent and Gutierrez awarded the contracts to WWM despite the fact that several more established companies had submitted bids offering lower prices. Id. at ¶ 43.

*3 Denham's investment helped finance WWM's performance under its agreements with CFE Int'l. Id. at ¶ 44. By the end of 2017, Denham, through its Oil & Gas Fund, owned a 100% interest in WWM's holding company, WhiteWater Midstream Investment Holding LLC. Id.

On December 1, 2018, Turrent left CFE Int'l, and on February 1, 2019, Gutierrez left CFE Int'l. Id. at ¶ 45. On February 4, 2019, Denham sold its entire stake in WWM. Id. At the time of that sale, WWM's CEO Rundlof publicly stated: “We are grateful to have had Denham and [the other principal private equity fund investment] as trusted partners. We appreciate their confidence in backing WhiteWater as a first-time team.” Id.

C. CFE Int'l’s Commercial Arbitration With WWM

In July 2021, WWM commenced an arbitration against CFE Int'l. Declaration of Brendan Quigley (Docket No. 37-5) (“Quigley Decl.”) at ¶ 6. The arbitration stems from CFE Int'l’s alleged failure to pay an invoice for natural gas delivered by WWM Logistics LLC (“WWML”) to CFE Int'l in February 2021, pursuant to a long-term gas-supply agreement between WWML and CFE Int'l (the “Gas Supply Agreement”). Id.[4] Among other things, CFE Int'l cited pricing issues during Winter Storm Uri in February 2021 and a purported “broader anti-corruption review by the Mexican government” as reasons for refusing to pay the invoice. Id. at ¶ 7.

In the arbitration, CFE Int'l has sought broad discovery, including unsuccessfully seeking the ability to take depositions. Id. at ¶ 11. WWML represents that third-party discovery is usually not available in international arbitration. Id. The hearing is scheduled to take place in March 2023. Id. at ¶ 10.

D. The Mexican Criminal Proceeding

On August 4, 2021, CFE Int'l submitted criminal allegations (the “Criminal Complaint”) to the Special Anti-Corruption Prosecutor at the Mexican Federal Attorney General's Office (“FGR”) in Mexico City, Mexico, alleging that Turrent and Gutierrez had, in their capacities as public servants, awarded the Waha Connector Agreements to WWM in contravention of Mexican law. Anson Decl. at ¶ 18. CFE Int'l has stated that it submitted the Criminal Complaint pursuant to Mexican legal obligations that require CFE Int'l, as a wholly owned subsidiary of CFE in control of public assets, to report likely violations of Mexican law. Id.; see also Aponte Decl. at ¶¶ 19-20, 34.[5] The Criminal Complaint alleges that Turrent and Gutierrez awarded the contracts to WWM without complying with Mexican procurement laws that require CFE to adhere to an open tender bidding process and to document this process. Anson Decl. at ¶ 22; see also Aponte Decl. at ¶¶ 30-32. It also alleges that a conflict of interest existed between Calhoun, on the one hand, and Gutierrez and Turrent in their capacities as CFE public servants, on the other, at the time the contracts were awarded. Aponte Decl. at ¶ 33.

In response to the Criminal Complaint, the Office of the Mexican Anti-Corruption Prosecutor in Mexico City opened an investigation into Turrent and Gutierrez's allegedly criminal abuses of power. Aponte Decl. at ¶ 35. The prosecutors have requested an initial hearing to present an “imputación” against Gutierrez, but not Turrent at this time,[6] in relation to the Criminal Complaint that CFE Int'l filed. Id. at ¶ 37.

*4 Presenting an “imputación” is the first step that the FGR takes in court to begin a criminal proceeding. Id. If the Court accepts the “inputación,” then it issues an order of committal, which allows for further investigation that typically takes at least six months or more. See Aponte Decl. at ¶ 40; Declaration of Pablo Gomez Mont Landerreche (Docket No. 37-1) (“Gomez Decl.”) at ¶¶ 11-12. Only after such further investigation will the Mexican Prosecutors then have the discretion to decide whether or not to present an “acusación.” Aponte Decl. at ¶ 40. An acusación is a formal accusation akin to an indictment in the U.S. system. Gomez Decl. at ¶ 13. Once an acusación is presented, bail is set, and a trial is scheduled. Gomez Decl. at ¶ 16; Aponte Decl. at ¶ 40.

An initial hearing occurred on May 23, 2022. Id. at ¶ 38. That hearing was adjourned until August 17, 2022 to, among other things, allow the “imputados” additional time to finish reviewing the file. Id. at ¶ 39. The Mexican court held a hearing on August 17, 2022, at which time Gutierrez requested a second adjournment. See Docket No. 23-4 at 13. The court adjourned the hearing to October 26, 2022. Id. The October hearing was adjourned because Gutierrez stated that a medical issue prevented him from attending. Ex. 2 to Declaration of Harris Fischman (Docket No. 49) (“Fischman Decl.”). The court indicated that it would set a new date once Gutierrez is able to attend in person. Id. A further hearing has been scheduled for April 6, 2023.

The ability of the FGR or the Mexican criminal court to obtain evidence directly from any of the accused for use in the proceeding is limited. Aponte Decl. at ¶ 45. Under Mexican law, individuals who are under investigation, such as Turrent and Gutierrez, have the right to remain silent in criminal proceedings. Id. This right attaches even before a formal criminal charge or arrest and allows an accused person to refuse to turn over any evidence that might prove their liability for the crimes for which they are being investigated. Id.

Victims have the right to access documents and information contained in the prosecutor's investigative file and they may submit and share evidence with the prosecutors. Gomez Decl. at ¶ 23; see also Aponte Decl. at ¶¶ 21-29, 42. CFE Int'l maintains that it is a victim in the Mexican criminal proceeding and, therefore, it has the right to submit and share evidence with the prosecutors. Docket No. 48 at 17-18. Denham, on the other hand, argues that CFE Int'l is not a victim and currently has no participation rights in the Mexican criminal proceeding. Docket No. 38 at 12. According to Denham, the mere filing of a complaint does not elevate the complainant to the status of victim. Gomez Decl. at ¶ 24. Moreover, as the allegations in CFE Int'l’s complaint relate to public corruption, without more details from the FGR, the “public” of Mexico are the victims, not the institution that employed the allegedly corrupt officials. Id. at ¶¶ 25-26.

E. Related Section 1782 Applications

This case is at least the fourth effort by CFE Int'l to use Section 1782 to obtain discovery from non-parties. See CFE International LLC v. Antaeus Group LLC, No. 1:22-cv-00365-LY-ML (W.D. Tex.) (“In re Antaeus”); CFE International LLC v. Arbor Glen Consulting LLC, No. 1:22-cv-00429-LY-ML (W.D. Tex.) (“In re Arbor Glen”); CFE International LLC v. JG Energy Consulting Corporation, No. 4:22-mc-00896 (S.D. Tex.) (“In re JG Energy”). In In re Antaeus and In re Arbor Glen, the court initially authorized the subpoenas on an ex parte basis but later granted the respondents’ motions to quash.

On January 17, 2023, CFE Int'l filed two new applications seeking authorization to serve subpoenas on Antaeus Group and Arbor Glen. See In re Application of CFE International v. Antaeus Group LLC, No. 23-cv-00056 (W.D. Tex.) (“In re Antaeus II”); In re Application of CFE International v. Arbor Glen Consulting, LLC, No. 23-cv-00057 (“In re Arbor Glen II”). The court granted the applications subject to the respondent's rights under the Federal Rules of Civil Procedure and set a briefing schedule for motions to quash.

*5 In In re JG Energy, the parties reached an agreement on the terms of document and deposition discovery that is acceptable to both parties and that should eliminate the need for JG Energy's motion to quash. Docket No. 63 at 1.

F. The Civil Action Against Gutierrez And Turrent

On September 21, 2022, CFE Int'l filed an action against Turrent and Gutierrez in Harris County District Court in Houston, Texas. See Docket No. 55-1 at 10. Turrent subsequently removed the case to U.S. District Court for the Southern District of Texas. CFE International LLC v. Turrent Schnaas, et al., No. 4:22-cv-03385 (S.D. Tex.). Gutierrez and Turrent filed a motion to stay the case pending final resolution of the criminal investigations involving them in Mexico. See Docket No. 55-1 at 10. CFE Int'l filed an opposition to the motion to stay on December 21, 2022. Id. at 5-36.

Among other things, in its opposition to Gutierrez and Turrent's motion to stay, CFE Int'l stated that:

Docket No. 55-1 at 11-12 (emphasis in original) (footnote omitted).

G. The Instant Proceeding

On September 14, 2022, this Court held an ex parte hearing on CFE Int'l’s application and, on September 19, 2022, issued a report and recommendation. Docket Nos. 24, 25. This Court noted that it had “serious reservations” regarding CFE Int'l’s application for a Section 1782 subpoena, including that “it is not clear that a criminal case will in fact go forward,” that the “relevance of the discovery requests is not entirely clear,” the “requests appear overly broad,” that “there is no indication that the Mexican authorities would be receptive” to the discovery, and CFE “may have been using the Section 1782 process to gather information and documents for purposes other than aiding law enforcement in the Mexican investigation.” Docket No. 25 at 9-11. Nevertheless, I recommended that Chief Judge Saylor grant the application subject to Denham's right to file a motion to quash. Id. at 11. Chief Judge Saylor adopted this Court's report and recommendation on October 17, 2022. Docket No. 30.

*6 Denham filed its motion to quash on December 1, 2022. Docket No. 37. CFE Int'l filed an opposition on December 16, 2022. Docket No. 48. On December 29, 2022, Denham filed a reply. Docket No. 50. On January 19, 2023, CFE Int'l filed a letter with an update regarding the status of the parties’ discussions as well as other proceedings. Docket No. 55. On February 13, 2023, CFE Int'l filed another letter that summarized its last proposal to narrow its own discovery requests as well as the terms of a proposed protective order. Docket No. 59. This Court heard oral argument on February 17, 2023.

II. ANALYSIS

A. Section 1782’s Statutory Requirements And The Intel Factors

Title 28, United States Code, Section 1782, “authorizes district courts to order persons residing in their district to participate in discovery ‘for use in a proceeding in a foreign or international tribunal,’ when an application for such discovery is made by a foreign or international tribunal, or by ‘any interested person.’ ” In re Porsche Automobil Holding SE, 985 F.3d 115, 120 (1st Cir. 2021). Granting discovery pursuant to Section 1782 is proper only if:

In re Schlich, 893 F.3d 40, 46 (1st Cir. 2018) (citing 28 U.S.C. § 1782).

Satisfaction of these statutory elements “authorizes, but does not require, discovery assistance.” Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 247 (2004). Rather, courts must consider the following factors in exercising their discretion whether to allow discovery pursuant to Section 1782:

In re Porsche, 985 F.3d at 120 (citing Intel Corp., 542 U.S. at 264-265). “[D]istrict courts must exercise their discretion under § 1782 in light of the twin aims of the statute: ‘providing efficient assistance to participants in international litigation and encouraging foreign countries by example to provide similar assistance to our courts.’ ” In re Schlich, 893 F.3d at 46-47 (quoting Intel Corp., 542 U.S. at 252).

B. CFE Int'l Has Failed To Satisfy The Requirement That The Discovery It Seeks Be For Use In A Proceeding In A Foreign Or International Tribunal

Denham argues that CFE Int'l has not met the requirement that the discovery it seeks be “for use in a proceeding in a foreign or international tribunal.” Docket No. 38 at 16-19. A foreign proceeding need not be “pending” or “imminent” in order for an applicant to secure relief under Section 1782, but it must be “within reasonable contemplation.” In re Fagan, No. 19-mc-91210-ADB, 2019 WL 2267063, at *3 (D. Mass. May 28, 2019) (citing Certain Funds, Accounts &/or Inv. Vehicles v. KPMG, L.L.P., 798 F.3d 113, 123 (2nd Cir. 2015)). “[A]t a minimum, a § 1782 applicant must present to the district court some concrete basis from which it can determine that the contemplated proceeding is more than just a twinkle in counsel's eye.” Id.

*7 Here, the Mexican criminal investigation is not, and may never be, in a stage where judicial proceedings are even under reasonable contemplation. At this stage, the proceedings appear to involve only an investigation into alleged wrongdoing. CFE Int'l has presented no evidence that, at the time of its application, either Gutierrez or Turrent would be charged with a crime or that any court proceedings were within contemplation. With respect to Turrent, there has not even been a request for an initial hearing to request an imputación against him. The mere fact that prosecutors are investigating CFE Int'l’s complaint falls short of the “for use in a proceeding in a foreign or international tribunal.” See In re Fagan, 2019 WL 2267063 at *3 (“[T]he mere fact of a complaint is not sufficient to establish an actual or reasonably foreseeable proceeding.”). Indeed, CFE Int'l has opposed Gutierrez and Turrent's efforts to stay the civil litigation against them by arguing that, at this stage, it is speculative whether Mexican prosecutors might indict them at some unknown date in the future. See Docket No. 55-1 at 11.

Nevertheless, CFE Int'l argues that it has met the “for use in a proceeding in a foreign or international tribunal” because Section 1782 explicitly authorizes discovery in “criminal investigations conducted before formal accusation.” Docket No. 48 at 13. Section 1782, however, requires that the discovery be for use in a “foreign or international tribunal.” 28 U.S.C. § 1782; see also Intel, 542 U.S. at 257-258. While certain investigating and quasi-judicial entities may meet this requirement under Section 1782, CFE Int'l has provided no support for the contention that a prosecutor that lacks adjudicatory powers qualifies as a foreign or international tribunal. Cf. In re Application for an Order Pursuant to 28 U.S.C. § 1782 to Conduct Discovery for Use in Foreign Proceedings, 773 F.3d 456, 461-462 (2nd Cir. 2014) (in finding that Section 1782 permits discovery for use in a foreign criminal investigation being conducted by an investigating magistrate, Second Circuit noted that investigating magistrates in the Swiss criminal justice system serve an impartial role akin to the French judges d'instruction, which Judge Friendly held out as the paradigmatic example of a tribunal for purposes of Section 1782).[7]

Accordingly, I find that CFE Int'l has failed to satisfy the statutory requirements for Section 1782 discovery.

C. The Intel Factors Weigh In Favor Of Quashing The Subpoenas

Even if CFE Int'l could meet the statutory requirements for Section 1782 discovery, the Intel factors weigh against discovery here. The first Intel factor is whether those from whom the applicants seek discovery are participants in the foreign proceeding. When they are, “the need for § 1782 aid generally is not as apparent as it ordinarily is when evidence is sought from a nonparticipant in the matter arising abroad.” Intel, 542 U.S. at 264. The first factor appears to favor granting the application because Denham is not a participant in the Mexican criminal investigation. However, the subpoenas do not tailor the requests to documents or information that are exclusively in the possession of Denham and may be obtainable from the parties in Mexico, including its parent company CFE. In addition, if the Mexican prosecutors want the evidence that CFE Int'l seeks, such evidence appears to be well within their reach through MLAT channels. Gomez Decl. at ¶ 20. In fact, Mexican prosecutors and law enforcement are directed to use MLAT procedures and other diplomatic means to collect evidence for their case as it preserves the custody and control of the evidence. Id. Therefore, the rationale for the first factor, i.e., the need for foreign discovery that would otherwise be unavailable, is lessened here. See Intel, 542 U.S. at 264.

*8 The second Intel discretionary factor is “the nature of the foreign tribunal, the character of the proceedings underway abroad, and the receptivity of the foreign government or the court or agency abroad to U.S. federal-court judicial assistance.” Id. On the record before the Court, it appears that the Mexican prosecutors would be receptive to any evidence obtained pursuant to a Section 1782 subpoena though it is unclear whether CFE Int'l would in fact be able to participate and present evidence to the court. The parties dispute whether CFE Int'l is actually a victim in the Mexican criminal proceedings and therefore able to present evidence to the FGR and/or the Court. Compare Gomez Decl. at ¶¶ 8, 24-26 with Aponte Decl. at ¶¶ 21-23, 44 and Fischman Decl. Ex. 6 at 2, 6.

Third is “whether the § 1782(a) request conceals an attempt to circumvent foreign proof-gathering restrictions or other policies of a foreign country or the United States.” Intel, 542 U.S. at 265. This factor weighs heavily in favor of quashing the subpoena. Like the subpoenas in the related Section 1782 proceedings, the subpoenas here seek documents and testimony that seemingly would be available from individuals and entities in Mexico, signaling an attempt to circumvent proof-gathering restrictions. See Docket No. 37-7 at 17-18. It also appears that CFE Int'l filed this application, as well as the related Section 1782 applications in Texas, to obtain discovery it could not otherwise obtain under the governing rules for the arbitration proceedings between it and WWM. CFE Int'l initiated the criminal complaint on August 4, 2021 only after the arbitration had commenced in July 2021. While CFE Int'l did not conceal the arbitration from this Court in its initial application, it did not affirmatively mention it in its memorandum of law in support of the application. Finally, CFE Int'l continues to refuse to enter into a protective order which would prevent it from using any discovery obtained pursuant to the subpoenas in any proceedings other than the Mexican criminal proceedings. See Docket No. 55 at 2.[8] CFE Int'l’s refusal to agree to a protective order limiting the use of any Section 1782 discovery to only the Mexican criminal proceedings supports the notion that it is in fact engaged in a fishing expedition seeking discovery for other civil claims and/or defenses.

Finally, this Court should consider whether the requested discovery is “unduly intrusive or burdensome.” Intel, 542 U.S. at 265. The subpoenas seek a very broad range of communications, financial records, and other documents, including highly confidential and commercially sensitive materials and potentially privileged communications. See Declaration of Anthony Fiore (Docket No. 37-2) (“Fiore Decl.”) at ¶¶ 9-10. In addition, Denham has submitted persuasive evidence that full compliance with several of requests in the subpoena would require Denham to collect all of the communications of all its employees, shareholders, directors, and lawyers from January 1, 2016 to February 28, 2019. See id. at ¶ 7.

*9 CFE Int'l argues that the subpoenas will not cause an undue burden upon Denham because CFE Int'l has proposed narrowing the scope of the subpoenas. Docket No. 48 at 25. Even the narrowed requests, however, still seek a vast range of documents, and the relevance of many of those requests to the Mexican criminal proceeding is still not apparent.[9] Rather, the nature of the requests suggests that CFE Int'l is using this application as a fishing expedition to uncover other unknown wrongdoing, whether by Denham or someone else. Therefore, the final factor also weighs in favor of quashing the subpoenas.

III. RECOMMENDATION

For the foregoing reasons, this Court recommends that Chief Judge Saylor grant Denham's motion to quash.

IV. REVIEW BY DISTRICT JUDGE

The parties are hereby advised that under the provisions of Fed. R. Civ. P. 72(b), any party who objects to these proposed findings and recommendations must file specific written objections thereto with the Clerk of this Court within 14 days of service of this Report and Recommendation. The written objections must specifically identify the portion of the proposed findings, recommendations, or report to which objection is made, and the basis for such objections. See Fed. R. Civ. P. 72. The parties are further advised that the United States Court of Appeals for this Circuit has repeatedly indicated that failure to comply with Fed. R. Civ. P. 72(b) will preclude further appellate review of the District Court's order based on this Report and Recommendation. See Phinney v. Wentworth Douglas Hospital, 199 F.3d 1 (1st Cir. 1999); Sunview Condo. Ass'n v. Flexel Int'l, Ltd., 116 F.3d 962 (1st Cir. 1997); Pagano v. Frank, 983 F.2d 343 (1st Cir. 1993).